IBM President Whitehurst Exits in CEO’s Shake-Up; Shares Dip

(Bloomberg) -- International Business Machines Corp. President Jim Whitehurst is stepping down after three years at the century-old technology company. The shares fell the most in five months.

The departure marks one of the first major corporate reshuffles under Chief Executive Officer Arvind Krishna, who took the helm last year and has moved quickly to reshape IBM and return it to growth. Whitehurst, 53, is the former CEO of Red Hat Inc., which IBM announced it was acquiring in 2018 in a $33 billion deal orchestrated by Krishna. As CEO, Krishna has focused on fast-growing technologies like artificial intelligence and cloud-computing services in an effort to revive decades of stagnation.

Whitehurst's departure is one of several management moves IBM announced on Friday. Whitehurst “decided to step down,” IBM said, and he will continue working as a senior adviser. IBM didn't announce a replacement. IBM shares tumbled 4.8% to $139.83 on the news.

Whitehurst was appointed president last April, the first time in decades that IBM separated the roles of CEO and president. His experience in cloud and cognitive software was viewed as a complement to Krishna, a longtime IBM executive. The former Red Hat chief played a critical role in Krishna's pivot to a hybrid-cloud strategy which allows customers to store data in private servers and on multiple public clouds. Even amid IBM's struggle to achieve revenue growth, Red Hat's performance has remained strong, posting a 17% gain in sales in the first quarter.

Whitehurst's departure came as a surprise for many analysts who saw it as a negative.

“This feels like a setback given the fact that Jim was expected to have an important role in the transformation initiative of IBM,” said Moshe Katri, an analyst at Wedbush Securities.

Prior to Red Hat, Whitehurst was the chief operating officer at Delta Airlines and was seen as a contender for CEO at IBM before Krishna's appointment.

Krishna has made a series of changes as he restructures the company. He announced sweeping job cuts in Europe late last year as he prepared to spin off of IBM's business that manages corporate computer systems so it could focus on the boom in demand for cloud services. Krishna said he expects IBM to return to growth this year.